Suspension of employees who are Approved Persons
The first action that is likely to be taken in respect of an employee suspected of significant wrongdoing is his suspension pending investigation. Check that there is a contractual right to suspend and the terms that will apply during any period of suspension.
The firm’s disciplinary policy may specify the maximum number of days for which an employee can be suspended. If not, and in any event, the suspension should only last for as long as reasonably necessary. Provisions regarding suspension (whether in employment contracts or disciplinary policies), should ideally not contain a maximum length of a suspension as this can be restrictive.
However, it is prudent to indicate the likely length of a suspension period, but that it may be longer if necessary. Usually, the longer the employee is suspended, the more difficult it is for the employee to return to work. Such employees are likely to consider that their reputation has been damaged.
The FCA must be notified where an Approved Person has ceased to perform a controlled function, and this should be done within 7 business days (by filing a Form C. However, where the Approved Person has been suspended or removed from normal duties, it may be necessary to file “as soon as practicable” a “qualified” Form C if the firm reasonably believes that the information it contains may affect the FCA’s assessment of the Approved Person’s fitness and propriety or that person is dismissed or resigns while under investigation by the firm, the FCA or any other regulatory body. The initial notification may be made to the firm’s FCA supervisor by telephone within hours or days, with a commitment to follow up with report shortly thereafter.
There may be employment law benefits to providing the Approved Person with a draft of the qualified Form C for their comments before submission to the FCA, but this is not usual practice. Firms must balance the need to notify issues promptly to the FCA against the need to conduct a reasonable investigation to ascertain whether or not suspicions of misconduct are founded.
Firms will be keen to persuade the FCA that it is not necessary for it to launch its own investigation under section 168(5) of FSMA or to commission a “skilled persons report” into the problem (section 166, FSMA). In most cases the FCA is content with the firm carrying out its own investigation and committing to providing the FCA with a copy of the report prepared at the conclusion of the investigation (the employer’s report).